Is it a good company at a reasonable price? If you were in the market to buy your first bank stock, you might want to look elsewhere because this bank does have problems to solve. I have a number of bank stocks of RY, TD and BMO. Personally, I will be keeping my shares in TD bank at this time. The stock is testing, generally, as reasonable and this surprises me. TD bank has fallen some 25% since a high in Feb 2022. It is only the dividend yield tests that are saying the stock price is cheap.
I own this stock of Toronto Dominion Bank (TSX-TD, NYSE-TD). This is the third bank I have bought. I have made 3 purchases and 2 sales. I sell when a stock is more than 10% of my portfolio and this is why I have sold some of this stock in the past.
I have done well with this stock. I have it in the RIF and LIF accounts. I have made 12.2% per year with 7.48% from capital gains and 4.72% from dividends. I have had this stock for almost 25 years.
When I was updating my spreadsheet, I noticed, and anyone cannot help but notice the current problems of this bank. See a recent review at Insurance News. There is also a review in the Financial Post.
The current dividend yield is good with dividend growth low. The current dividend yield is good (5% to 6% ranges) at 5.36%. The 5, 10 and historical median dividend yields are moderate (2% to 4% ranges) at 4.53%, 3.98% and 3.55%. The dividend increases for the past 5 years is low (less than 8% per year) at 7.14% per year. The last dividend increase was 6.25% and it occurred at the end of 2024. I would expect dividend increases in the future to be low or stopped.
The Dividend Payout Ratios (DPR) need improving. The DPR for 2024 for Earnings per Share (EPS) is too high at 86% with 5 year coverage at 52%. The DPR for 2024 for Adjusted Earnings per Share (AEPS) is too high at 52% with 5 year coverage at good at 48%. The DPR for 2024 for Cash Flow per Share (CFPS) is too high at 78% with 5 year coverage at 49%. The DPR for 2024 for Free Cash Flow (FCF) is too high at 68% with 5 year coverage good at 43%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 86.44% | 52.30% |
| AEPS | 52.24% | 48.17% |
| CFPS | 78.43% | 48.78% |
| FCF | 68.06% | 42.66% |
We need to look at the Long Term Debt/Covering Assets Ratio for 2024 which is good at 0.85 and currently at 0.85 because this is a more important one for a financial than the Long Term Debt/Market Cap Ratio. The Liquidity Ratio for 2024 is good at 1.55 and 1.50 currently. If you added in Cash Flow after dividends, the ratios are fine at 1.53 and currently at 1.76. The Debt Ratio for 2024 is good at 1.68 and 1.68 currently. The Leverage and Debt/Equity Ratios for 2024 are good at 1.47 and 0.47 and currently at 1.46 and 0.46.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R A | 0.85 | 0.85 |
| Lg Term R | 9.42 | 9.32 |
| Intang/GW | 0.16 | 0.16 |
| Liquidity | 4.04 | 4.04 |
| Liq. + CF | 4.98 | 4.98 |
| Debt Ratio | 1.06 | 1.06 |
| Leverage Bk | 4.2% | 4.2% |
| Leverage | 17.90 | 17.90 |
| D/E Ratio | 16.90 | 16.90 |
The Total Return per year is shown below for years of 5 to 49 to the end of 2024. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2019 | 5 | 7.14% | 5.74% | 1.00% | 4.74% |
| 2014 | 10 | 8.29% | 7.75% | 3.26% | 4.49% |
| 2009 | 15 | 8.38% | 10.43% | 5.77% | 4.66% |
| 2004 | 20 | 9.37% | 10.08% | 5.76% | 4.32% |
| 1999 | 25 | 10.20% | 9.47% | 5.65% | 3.82% |
| 1994 | 30 | 10.76% | 14.93% | 9.30% | 5.63% |
| 1989 | 35 | 9.37% | 12.34% | 8.03% | 4.31% |
| 1984 | 40 | 9.85% | 14.22% | 9.16% | 5.06% |
| 1979 | 45 | 10.29% | 16.35% | 10.09% | 6.25% |
| 1975 | 49 | 10.61% | 15.12% | 9.75% | 5.37% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.25, 9.82 and 11.82. The corresponding 10 year ratios are 10.68, 11.93 and 13.15. The corresponding historical ratios are 10.50, 11.93 and 13.15. The current ratio is 11.21 based on a stock price of $78.36 and EPS estimate for 2025 of $6.99. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 9.35, 10.62 and 11.71. The corresponding 10 year ratios are 9.67, 11.20 and 12.41. The current ratio is 9.99 based on a stock price of $78.36 and AEPS estimate for 2025 of $7.84. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $102.51. The 10-year low, median, and high median Price/Graham Price Ratios are 0.76, 0.87 and 0.97. The current ratio is 0.76 based on a stock price of $78.36. The current ratio is at the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median and very close to cheap.
I get a 10-year median Price/Book Value per Share Ratio of 1.54. The current P/B Ratio is 1.32 based on a stock price of $78.36, Book Value of $104,272M and Book Value per Share of $59.57. The current ratio is 14% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have a Book Value per Share estimate for 2025 of $62.01. This implies a ratio of 1.26 based on a stock price of $78.36 and a Book Value of $108,536M. The current ratio is 18% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 2.76. The current P/CF Ratio is 2.45 based on a stock price of $78.36, Cash Flow for the last 12 months of $54,937M, and Cash Flow per Share of $31.39. The current ratio is 11% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 3.55%. The current dividend yield is 5.36% based on dividends of $4.20 and a stock price of $78.36. The current ratio is 51% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 3.98%. The current dividend yield is 5.36% based on dividends of $4.20 and a stock price of $78.36. The current ratio is 35% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 3.16. The current P/S Ratio is 25.61 based on a stock price of $78.36, Revenue estimate for 2025 of $52,608M and Revenue per Share of $30.06. The current ratio is 17% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable but could be cheap. The dividend yields tests are showing that the stock price is cheap. This is not surprising. The P/S Ratio test is showing the stock price as reasonable. Most of the testing is showing the stock price as reasonable and this is surprising. I would have thought they would all show the stock price as cheap.
When I look at analysts’ recommendations, I find Strong Buy (5), Buy (3), Hold (7) and Underperform (1). The current consensus would be a Buy. The 12 month stock price consensus is $84.36 with a high of $94.00 and a low of $77.00.
Analysts in 2025 onStock Chase like this stock, but say do not expect a quick recovery, but buy for the long term. In 2024, analysts’ comments were a mixed bag with variations on Do Not Buy to Hold to Buy. Stock Chase gives this stock 5 stars out of 5. Aditya Raghunath on Motley Fool reviews this stock, but he expects recovery to be in 2027. Andrew Button on Motley Fool says that TD is trading cheaper than its US peers. The bank put out a press release on Newswire about their fourth quarter of 2024. Insider Monkey via Yahoo Finance says TD ranks six on their best Canadian stocks for income investors.
Simply Wall Street via Yahoo Finance talks about TD’s dividends. Simply Wall Street has no warnings out on this bank. Simply Wall Street gives this bank 4 stars out of 5.
Toronto-Dominion is one of Canada's two largest banks and operates three business segments: Canadian retail banking, US retail banking, and wholesale banking. The bank's US operations span from Maine to Florida, with a strong presence in the Northeast. It also has a 13% ownership stake in Charles Schwab. Its web site is here Toronto Dominion Bank.
The last stock I wrote about was about was Calian Group Ltd (TSX-CGY, OTC-CLNFF) ... learn more. The next stock I will write about will be Bank of Nova Scotia (TSX-BNS, NYSE-BNS) ... learn more on Wednesday, January 15, 2025 around 5 pm. Tomorrow on my other blog I will write about Marc Andreessen interview .... learn more on Tuesday, January 14, 2025 around 5 pm.
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